The mutual fund is one of the most popular investment vehicles for individual investors. The mutual fund allows investing in a diversified portfolio of securities managed by professionals with expertise in picking and managing investments. 

However, selecting a top 5 – 10 mutual fund is challenging as there are thousands of mutual funds in India that an investor can invest in. So, if you want to invest in the best mutual fund, consider taking a risk profiling test to analyze your risk-taking ability and the number of years left for your goals. In this article, I have shared the best mutual fund performance 2024 list and their selection technique.

You can measure your risk-taking ability by taking a risk profiling test. It is crucial to measure your risk profiling, although you may feel that you can take the risk because human feeling changes with the market situation change because of human behavior. A rule of thumb says investors can invest in high-risk funds for their long-term goals and low-risk funds for short-term goals.

Best Mutual Funds Performance: Top Performing Mutual Funds in India

Here is the list of the top 10 best performing mutual funds to invest

Best Mutual Fund Performance: Large Cap Fund

Fund Name	Category	5 Years Return (%)	7 Years Return (%)	10 Years Return (%)	Sortino Ratio	Beta	Alpha
Canara Robeco Bluechip Equity Fund – Direct Plan-Growth	Large Cap	18.47	17.53	16.59	0.84	0.89	0.18
ICICI Prudential Bluechip Fund – Direct Plan-Growth	Large Cap	18.01	16.72	16.96	2.73	0.88	4.08

Best Mutual Fund Performance: Flexi Cap Fund

Fund Name	Category	5 Years Return (%)	7 Years Return (%)	10 Years Return (%)	Sortino Ratio	Beta	Alpha
Parag Parikh Flexi Cap Fund – Direct Plan-Growth	Flexi Cap	23.72	20.72	20.44	2.14	0.65	7.7
PGIM India Flexi Cap Fund – Direct Plan-Growth	Flexi Cap	21.50	18.34	–	2.11	0.88	0.75

Best Mutual Fund Performance: Mid Cap Fund

Fund Name	Category	5 Years Return (%)	7 Years Return (%)	10 Years Return (%)	Sortino Ratio	Beta	Alpha
Kotak Emerging Equity Fund – Direct Plan-Growth	Mid Cap	23.85	19.74	24.44	2.76	0.85	1.86
PGIM India Midcap Opportunities Fund – Direct Plan-Growth	Mid Cap	26.91	20.43	19.67	2.55	0.88	0.25

 Best Mutual Fund Performance: Hybrid Fund

Fund Name	Category	5 Years Return (%)	7 Years Return (%)	10 Years Return (%)	Sortino Ratio	Beta	Alpha
ICICI Prudential Equity & Debt Fund – Direct Plan-Growth	Hybrid Fund	20.49	17.35	18.80	4	0.79	11.97
HDFC Children’s Gift Fund – Direct Plan-Growth	Hybrid Fund	17.81	16.49	17.04	3.05	0.73	7.04

 Best Mutual Fund Performance: Arbitrage Fund

Fund Name	Category	5 Years Return (%)	7 Years Return (%)	10 Years Return (%)	Sortino Ratio	Beta	Alpha
Kotak Equity Arbitrage Fund – Direct Plan-Growth	Arbitrage Fund	5.89	6.11	6.70	2.04	0.79	2.39
Nippon India Arbitrage Fund – Direct Plan-Growth	Arbitrage Fund	5.89	6.18	6.69	1.90	0.82	2.32

Remember: The best performer is not always the best performer. So, the best option is to learn the selection technique.

Best Mutual Funds for SIP

SIP stands for Systematic Investment Plan.

Often, people use SIP as a synonym for Mutual Fund. Basically, any instrument (FD, RD, PPF, etc), if invested in a systematic manner, is an SIP (Systematic Investment Plan).

As systematic investment became popular due to Mutual Funds, it has been used as a synonym for Mutual Fund.

The classic example is Xerox; people often use the word “Xerox” instead of photocopy.

The process, which made photographic copies onto plain, uncoated paper, had been known for some time, but this was its first commercial application. The product brought so much success, and the name “Xerox” was used as a synonym for photocopy.

Same way SIP became a synonym for Mutual Fund. SIP is an investment strategy that allows investors to regularly contribute a fixed amount of money at predetermined intervals (usually monthly) into a mutual fund. 

So the next question is, what are the best Mutual Funds to invest in for SIP?

As we mentioned above, SIP is just the way to invest. The above provided Top Performing Mutual Funds in India are good for SIP and lumpsum investment. But, be cautious if the lumpsum amount is large; then, you must invest via STP mode, not one-time.

Best Mutual Funds Selection Technique For Equity Mutual Funds

We all want to pick up the best-performing mutual fund, so it is essential to understand a few components that can help you pick the best-performing mutual funds.

1. Investment objective and fund category: Before you start searching for the best mutual fund, it is essential to understand the fund investment objective and your investment objective, which means that you need to understand your goals. You need to decide whether to invest for short-term or long-term goals. It is essential to be specific on goals to choose the right category; rather than saying short-term goals name your goals. Example: I want to go on a vacation after 1 year, for which I want to save Rs. 1 lakh. Once you have a clear understanding of your investment goals, it’s time to choose funds aligned with your goal objective. You must choose the right fund category based on investment goals and risk tolerance. Selecting the wrong category (like equity fund for the short-term goal) just by looking at a return may shake your financial foundation. 
2. Fund History: The fund performance over time can give you the confidence to invest and stick to the funds even during a market correction. Hence, look for mutual funds having a long track record of delivering consistent returns over different market cycles. 
3. Expense ratio: The expense ratio expresses how much you pay a fund house as a percentage of your investment every year to manage your money.
   • Example, if you invest Rs. 20,000 in a fund with an expense ratio of 1%, then you are paying the fund Rs 200 a year to manage your money. An investor’s returns will reduce if the expense ratio is high. Hence, an investor should look for a scheme with a lower expense ratio, and investing in a Direct Plan is the best way sure short lower the expense ratio.
4. Fund Manager’s Performance: When we invest in mutual funds, we primarily invest in fund management strategy. The fund manager plays a crucial role in the fund’s performance. You need to look at the fund manager’s track record and experience before investing in the fund. You can also look at the fund manager’s investment philosophy and style to see if it matches your investment objectives. The investor should track the performance by monitoring the alpha generated for the fund. The higher the alpha better is the fund manager’s performance. Alpha is the excess returns comparative to the market benchmark for a given amount of risk taken by the scheme.
5. Fund Performance: Once you have selected the fund category, you need to analyze the fund’s performance. You can do this by looking at the fund’s historical performance, its risk-adjusted returns, and its benchmark performance. You can also look at the fund’s expense ratio, AUM growth, etc.
6. Check the financial ratio: As we all know, return is interconnected with the risk involved in the investment. However, most of the time, investors look only for a return for choosing the best perming mutual funds. You must look for four financial ratios to shortlist the funds for your financial goals. 
   • a)Alpha: Alpha is the excess returns compared to the market benchmark for a given amount of risk taken by the scheme. The higher the alpha, the better the fund manager’s performance. 
   • b) Beta: Beta measures the fund’s sensitivity to the market. The Beta of the market is 1. A fund’s Beta of more than one indicates a wide swing in the value of an investment in response to ups and down in the benchmark’s value and a narrow swing for a beta of less than 1.
   • The lower the Beta, the less sensitive, and the better it is for the investors.
   • c) Sortino: Sortino ratio measures the fund’s ability to control loss (downside protection) during the market correction. The higher the Sortino ratio, the better the fund’s ability to prevent losses. A Sortino ratio of more than one is acceptable.
   • d) Standard deviation: It measures the total volatility of a fund. The higher the standard deviation, the more volatile the fund. A lower standard deviation is better. While shortlisting the funds, look for funds with lower Standard deviation.

Tax Implication on the Best Mutual Funds in India

Mutual fund capital gain tax is applicable only when the gain is realized by selling the units. For any notional capital gain, tax is not applicable.

Let us understand this with an example:

Suppose you invested Rs. 2 lakhs in a mutual fund scheme in 2017, and the market value of that investment is Rs. 3 lakhs, which means a notional capital gain of Rs. 1 lakh – Will you have to pay tax on this?

The answer is NO- no mutual fund taxation will be applicable unless you sell the units and realize your capital gain of Rs. 1 lakh.

Suppose you sell 50% of your investment, which is Rs. 1.5 lakhs out of Rs. 3 lakhs; in that case, your notional capital gain is Rs. 50,000, whose value may further increase in the future, and on this notional capital gain of Rs. 50,000, there won’t be any capital gain tax applicable. However, on the other half 50,000 realized capital gain, mutual fund taxation will be applicable based on which category they fall in, equity or debt.

Taxation of Capital Gains of Equity Mutual Funds

Taxation of Capital Gains of a mutual fund is based on their duration:

Fund Catagory	Short Term Capital Gain (STCG)	Long Term Capital Gain (LTCG)
Equity	Less than 12 months	More than & equal to 12 months

 Any mutual fund scheme holding 65% of equity or more is considered under equity fund.

💡Pro Tip: Equity Arbitrage fund, which is a low-risk scheme, is considered under an equity scheme for taxation due to arbitraging in equity. Instead of liquid funds, you may park your emergency fund to generate a better post-tax return.

Who Should Invest in the Best Mutual Funds?

Best Mutual fund Schemes are those that outperform their benchmark in all market conditions. However, it might not be possible all the time. Hence, financial planning becomes essential so that you plan well. Below are the pointers that guide on who should invest in the best mutual fund:

• 🔹Want to achieve financial goals: Investors who want to fulfill all their life goals on time should invest in the best mutual funds based on their risk appetite and the time left to achieve their goals. 
• 🔹Individuals looking to invest regularly: SIP is the best way to invest regularly. Wise investors have inculcated a habit of regular investment for their wealth creation.
• 🔹Better returns than traditional saving options: With lifestyle changes, traditional saving options may not help achieve all life goals. The guaranteed/fixed interest rate in traditional savings is always low and attracts high capital gain tax. On the contrary, mutual funds are neither risk-free nor deliver guaranteed higher returns but can deliver a better return than traditional saving options, like bank FD, RD, etc., depending upon the mutual fund category.
• 🔹Expert money management: Investors looking for professionals to manage their money can opt for equity mutual funds.

Conclusion

Before investing in the best mutual fund, you must understand your investment objective/financial goals, risk-taking ability, and investment duration, then choose the best mutual fund accordingly.

Important Articles related to Personal Finance

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• Tax Planning For Salaried Employees
• Investment Planning For Salaried Employees
• Mutual Fund KYC Online Registration
• How To Invest In Direct Mutual Funds?
• How To Start SIP Investment In Mutual Funds?
• 5 Mutual Fund Types: Learn To Choose The Right Fund For You

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